Author Topic: Stop Overpaying for Lightly Used Cars  (Read 5393 times)

Dicey

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Stop Overpaying for Lightly Used Cars
« on: September 14, 2018, 10:53:11 AM »
A shout-out to JD Roth for this link today. Of course the author doesn't mention the higher cost of insurance, but it's excellent food for thought:

https://jalopnik.com/stop-overpaying-for-lightly-used-cars-1828576980

wheezle

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Re: Stop Overpaying for Lightly Used Cars
« Reply #1 on: October 02, 2018, 08:08:03 PM »
Totally agree. If you're on the market for a Corolla or something, you really ought to consider buying new.

Mississippi Mudstache

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Re: Stop Overpaying for Lightly Used Cars
« Reply #2 on: October 03, 2018, 02:25:47 PM »
A shout-out to JD Roth for this link today. Of course the author doesn't mention the higher cost of insurance, but it's excellent food for thought:

https://jalopnik.com/stop-overpaying-for-lightly-used-cars-1828576980

Interesting. I'm close to being in the market for a "new" car. I was nearly swayed when I found a 2016 Ford Fiesta, new (how did that happen?) for close to the price of the well-used Honda Fits/Accords that I've been looking at. I held back after reading some reviews of the Ford Fiesta, though. Makes me skittish to buy a Ford anyway, given that the only car they'll be producing in the future is a Mustang.

wheezle

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Re: Stop Overpaying for Lightly Used Cars
« Reply #3 on: October 03, 2018, 02:29:02 PM »
... given that the only car they'll be producing in the future is a Mustang.
Yeah, that bothers me. I'm driving a Ford right now, but I think I may turn to the dark side and go Japanese.

SweetRedWine

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Re: Stop Overpaying for Lightly Used Cars
« Reply #4 on: October 04, 2018, 10:29:11 AM »
I've frequently tried to feel the shame I've read that I should have due to buying a new Japanese economy car.  I didn't even contemplate used cars.  How can I consider myself frugal?  Every personal finance blog I've ever read extolls the virtues and intelligence of buying used cars.  I've tried so hard, but I can't feel the shame! 

I'm very happy with my new car.  My next car will more than likely also be purchased new.

SpacemanSpiff

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Re: Stop Overpaying for Lightly Used Cars
« Reply #5 on: October 10, 2018, 11:03:09 AM »
Ha - cool to see this when I just ran into this situation a month ago, and it seemed the prices I was looking at ran contrary to "typical personal finance wisdom" of the first couple years being so depreciation heavy that you'd be crazy to buy new.

One of our Civics just got destroyed after 10 years of loyal service (cumulative repairs of <$500) when it was rear-ended by an uninsured dingbat and insurance declared it a total loss. (was hoping to get another ~5 years out of it)

In looking at new Hondas and Toyotas (base level trim Civics, Corollas, CR-Vs, and RAV4s specifically) compared to any used ones (any trim from those models) that were 2-4 years old, this is exactly the scenario we ran into.  I pored through >50 used cars on Autotrader and other websites before we ended up deciding that even from a bottom line perspective, the new cars were the way to go for us because the price difference for the used cars was so low for base model Hondas/Toyotas.  Also now we have a higher likelihood that the car will last a long time as we know for sure that it will have been properly maintained from day 1.

golden1

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Re: Stop Overpaying for Lightly Used Cars
« Reply #6 on: October 10, 2018, 12:05:45 PM »
Yep used Toyota’s and Hondas are pricey because they have low depreciation, so I think there is definitely justification for buying new. 

SnackDog

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Re: Stop Overpaying for Lightly Used Cars
« Reply #7 on: October 10, 2018, 12:16:47 PM »
In 2008 I purchased a 2007 Outback for AU$32,000, saving $3000 over new.  By 2009 brand new ones had fallen to $31,000 due to the economic collapse.

On the other hand, the clown car I just purchased was a 60% discount to new, 2 years old and in mint condition.

Slee_stack

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Re: Stop Overpaying for Lightly Used Cars
« Reply #8 on: October 11, 2018, 08:31:48 AM »
You'll likely only overpay on lightly used, high-demand vehicles.

Anything in-demand you'll overpay for new as well.

Buy something no one wants and you'll do just fine.

We own a Lincoln (sedan) and a Saab (wagon).  We bought each when they were 3 years old.  They were seriously depreciated because almost no-one in the United states (or possibly anywhere) wants either one.

Both are actually quite nice vehicles too!

When you don't care about impressing even a single other person on the planet with a motorized vehicle, you can do very well on lightly used.  Just choose appropriately.

dcheesi

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Re: Stop Overpaying for Lightly Used Cars
« Reply #9 on: October 11, 2018, 08:45:21 AM »
You'll likely only overpay on lightly used, high-demand vehicles.

Anything in-demand you'll overpay for new as well.

Buy something no one wants and you'll do just fine.

We own a Lincoln (sedan) and a Saab (wagon).  We bought each when they were 3 years old.  They were seriously depreciated because almost no-one in the United states (or possibly anywhere) wants either one.

Both are actually quite nice vehicles too!

When you don't care about impressing even a single other person on the planet with a motorized vehicle, you can do very well on lightly used.  Just choose appropriately.
The demand for Toyotas and Hondas isn't about impressing anyone; it's about consistent reliability, as well as abundant/cheap(ish) repair options when they do break.

The odd-ball cars that no one wants are often expensive to repair (esp. European imports) and/or lack the track record of the aforementioned popular brands/models. Now you can certainly get lucky and wind up with solid non-lemon for a good price, but you're taking more of a risk there vs. the proven reliable models.

Slee_stack

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Re: Stop Overpaying for Lightly Used Cars
« Reply #10 on: October 15, 2018, 02:45:17 PM »
You'll likely only overpay on lightly used, high-demand vehicles.

Anything in-demand you'll overpay for new as well.

Buy something no one wants and you'll do just fine.

We own a Lincoln (sedan) and a Saab (wagon).  We bought each when they were 3 years old.  They were seriously depreciated because almost no-one in the United states (or possibly anywhere) wants either one.

Both are actually quite nice vehicles too!

When you don't care about impressing even a single other person on the planet with a motorized vehicle, you can do very well on lightly used.  Just choose appropriately.
The demand for Toyotas and Hondas isn't about impressing anyone; it's about consistent reliability, as well as abundant/cheap(ish) repair options when they do break.

The odd-ball cars that no one wants are often expensive to repair (esp. European imports) and/or lack the track record of the aforementioned popular brands/models. Now you can certainly get lucky and wind up with solid non-lemon for a good price, but you're taking more of a risk there vs. the proven reliable models.
The reliability differences are nowhere near as drastic as they used to be.   Some would argue that Japanese makes have slipped to LESS reliable.  Isn't Toyota ranked #4?  But what does that even mean?   High performance, esoteric cars are certainly not in the conversation.  Those would almost universally be a bad deal.

In The Millionaire Next Door, the most common vehicle being reported owned was a domestic sedan. 

People still overpay for Hondas and Toyotas in the same way that people continue to buy any brand name.  They think they are getting better, but in reality, they might be paying extra HOPING they also get more.

UNPOPULAR (not odd ball) cars will always be cheaper everything else equal...and reliability today is a very near 'everything else equal'.

While I presume that folks here aren't buying anything to show off....I've absolutely witnessed folks crow about their recent Honda or Toyota purchase as if they've 'upgraded' over something lesser like ugggh Korean...or Domestic!

I personally don't care what badge is on it as long as its the best deal.



radram

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Re: Stop Overpaying for Lightly Used Cars
« Reply #11 on: October 15, 2018, 03:30:31 PM »
For me, I am all about cost of ownership.

For every $1,000 I spend on the cost of a vehicle, I expect to get 1 year of use, and 10,000 miles. I also expect all cars to be worthless after 130,000, so my 10,000 miles per thousand can not go beyond that threshold. All other miles are gravy, and "free miles".

I will not add to that the regular cost of maintenance. If a major repair is needed, I will first ask myself if I expect to get another 10,000 miles and 1 year of service for every $1,000 I am about to spend.

If a new car costs $24,000, I would require 24 years of trouble free driving, and over 240,000 miles with no major breakdowns. Not likely(and in fact impossible with my 130,000 mileage limit), so those cars are not an option for me.

I do not always meet my target. My worst vehicle has cost me $1,400 per year of use.


My latest:
A 2008 Honda Fit with 73,000 miles for $5,500, bought summer 2018. I am hopeful this will be one of my best vehicles ever.
A 2000 Ford Ranger with 74,000 miles for $1,800, bought 2 days ago. This one is admittedly a gamble. It test drove so well, but is by far the oldest vehicle I ever purchased. I am asking a lot to get another 2 years out of it. My 2002 Ranger blew an engine this summer(only 94,000, bummer). A replacement would have been a used engine with 144,000 miles for $2700 installed. It would never have passed my requirements, so time to say goodbye(this was my $1,400 per year vehicle).

I recommend everyone use a similar comparison in an effort to normalize different cars to see if they were "worth it" for you. If $1,000 is too low for you, just choose an amount you are comfortable with.

ender

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Re: Stop Overpaying for Lightly Used Cars
« Reply #12 on: October 15, 2018, 03:37:34 PM »
We saw the same thing a few years ago looking into buying a Ford Escape.

We paid $16500ish for a brand new Escape with MSRP around $25k. Similar cars that were 2-3 years used were all around 14-14.5k depending on mileage. While we probably paid a slight premium for 2-3 more years of car ownership the gap was much, much, MUCH less than many of the "buy used 4life!" advocates.

I'm a little surprised @radram that you ignore maintenance costs in your calculation.

ysette9

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Stop Overpaying for Lightly Used Cars
« Reply #13 on: October 15, 2018, 09:45:32 PM »
For me, I am all about cost of ownership.

For every $1,000 I spend on the cost of a vehicle, I expect to get 1 year of use, and 10,000 miles. I also expect all cars to be worthless after 130,000, so my 10,000 miles per thousand can not go beyond that threshold. All other miles are gravy, and "free miles".

I will not add to that the regular cost of maintenance. If a major repair is needed, I will first ask myself if I expect to get another 10,000 miles and 1 year of service for every $1,000 I am about to spend.

If a new car costs $24,000, I would require 24 years of trouble free driving, and over 240,000 miles with no major breakdowns. Not likely(and in fact impossible with my 130,000 mileage limit), so those cars are not an option for me.

I do not always meet my target. My worst vehicle has cost me $1,400 per year of use.


My latest:
A 2008 Honda Fit with 73,000 miles for $5,500, bought summer 2018. I am hopeful this will be one of my best vehicles ever.
A 2000 Ford Ranger with 74,000 miles for $1,800, bought 2 days ago. This one is admittedly a gamble. It test drove so well, but is by far the oldest vehicle I ever purchased. I am asking a lot to get another 2 years out of it. My 2002 Ranger blew an engine this summer(only 94,000, bummer). A replacement would have been a used engine with 144,000 miles for $2700 installed. It would never have passed my requirements, so time to say goodbye(this was my $1,400 per year vehicle).

I recommend everyone use a similar comparison in an effort to normalize different cars to see if they were "worth it" for you. If $1,000 is too low for you, just choose an amount you are comfortable with.
130,000 seems like and arbitrary number to draw the line at for mileage. That feels like a young car yet to me, for a Japanese car at least. We sold a Civic with 213,000 miles on the original clutch with no major repairs.
« Last Edit: October 16, 2018, 09:17:16 AM by ysette9 »

chasesfish

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Re: Stop Overpaying for Lightly Used Cars
« Reply #14 on: October 16, 2018, 08:39:16 AM »
If you can drive one vehicle for 15+ years and not have the itch to change, buying new works out okay on a Honda/Toyota.  It can vary by state because car taxes are a nightmare.

I'm at 207,000 and counting on my Honda I bought new.  Wife has a sixteen year old jeep wrangler she got new.


The most economical path is to get good at tinkering with cars and buy fully depreciated vehicles, but you have to love tinkering with cars.  Buddy of mine is a Land Cruiser nut, they're not gas efficient at all but he buys them at 200,000 miles, keeps them maintained himself, and then sells at a profit when he finds the next one.

radram

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Re: Stop Overpaying for Lightly Used Cars
« Reply #15 on: October 16, 2018, 11:01:58 AM »
For me, I am all about cost of ownership.

For every $1,000 I spend on the cost of a vehicle, I expect to get 1 year of use, and 10,000 miles. I also expect all cars to be worthless after 130,000, so my 10,000 miles per thousand can not go beyond that threshold. All other miles are gravy, and "free miles".

I will not add to that the regular cost of maintenance. If a major repair is needed, I will first ask myself if I expect to get another 10,000 miles and 1 year of service for every $1,000 I am about to spend.

If a new car costs $24,000, I would require 24 years of trouble free driving, and over 240,000 miles with no major breakdowns. Not likely(and in fact impossible with my 130,000 mileage limit), so those cars are not an option for me.

I do not always meet my target. My worst vehicle has cost me $1,400 per year of use.


My latest:
A 2008 Honda Fit with 73,000 miles for $5,500, bought summer 2018. I am hopeful this will be one of my best vehicles ever.
A 2000 Ford Ranger with 74,000 miles for $1,800, bought 2 days ago. This one is admittedly a gamble. It test drove so well, but is by far the oldest vehicle I ever purchased. I am asking a lot to get another 2 years out of it. My 2002 Ranger blew an engine this summer(only 94,000, bummer). A replacement would have been a used engine with 144,000 miles for $2700 installed. It would never have passed my requirements, so time to say goodbye(this was my $1,400 per year vehicle).

I recommend everyone use a similar comparison in an effort to normalize different cars to see if they were "worth it" for you. If $1,000 is too low for you, just choose an amount you are comfortable with.
130,000 seems like and arbitrary number to draw the line at for mileage. That feels like a young car yet to me, for a Japanese car at least. We sold a Civic with 213,000 miles on the original clutch with no major repairs.

I agree, it is quite arbitrary. I chose 130,000 because the vehicles I normally buy are only worth about $2,000-$3,000 by the time they reach this mileage, so any major repair (> $1,000) is about 50% of its value. It is around this mileage where, in my experience, a major repair is more of an expectation rather than an unpleasant surprise. It will often be more advantageous to buy 20% of a newer vehicle (like the Fit I just bought) instead of putting it into the older, higher mileage car. Not to mention just because you just made 1 major repair, that does not mean there are not 3 more right around the corner.

Funny thing about car repair and purchase is that you only find out at the end of its life whether or not the car was worth owning, or too expensive.

I guess I would be financially better off if I sold all my cars at the point just BEFORE a major repair is about to be needed (I know, how do you know for sure), but that just feels wrong to me.

I agree with all whom have said that cars can, and often do, get many more miles than 130,000. My dad has been driving the same 90's Cadillac for 25 years. He has spent more that $5,500 in the past 5 years in repairs. There comes a time when maintaining a vehicle just is not worth it. I think his time was about 5 years ago. He disagrees, and he just put another $900 into it last week.

Mississippi Mudstache

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Re: Stop Overpaying for Lightly Used Cars
« Reply #16 on: October 17, 2018, 10:25:29 AM »
I like your thought process, radram, but I include more variables than just purchase price. I estimate MPG and expected fuel costs from fuelly.com. If the vehicle is a hybrid, I include replacement battery costs in the calculation. I average 20,000 miles/year due to my clown commute, and I also assume that the car will last to 200,000 miles and then fall apart. Any extra mileage past 200K is just gravy. If I get an average annual cost of ownership, including purchase price, fuel, maintenance, and taxes, of <$3,000, I consider it a win. That number is damn near impossible to hit with any new car if you're driving 20K miles/year.

CoffeeR

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Re: Stop Overpaying for Lightly Used Cars
« Reply #17 on: October 17, 2018, 01:34:51 PM »
A shout-out to JD Roth for this link today. Of course the author doesn't mention the higher cost of insurance, but it's excellent food for thought:

https://jalopnik.com/stop-overpaying-for-lightly-used-cars-1828576980
I've noticed this for years. The list price of a new car makes a used car seem like a possible option, but once you negotiate the price of the new down and make use of incentives, most lightly used cars appear overpriced to me. Part of the problem is that the negotiating room for used car prices seems to be less than new car prices. I am not sure I understand why, but that is my observation.

When friends of ours told us they were shopping for a one year old car (they did not even consider new) I told then to look at new ones and price compare. They ended up purchasing new.

Now, once the car is 5+ years old (arbitrary number, I do not know the real number), then the $$$ math for used cars make sense. Last two cars I purchased where 5+ years old.

The Fake Cheap

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Re: Stop Overpaying for Lightly Used Cars
« Reply #18 on: October 18, 2018, 06:27:49 PM »
This seemed to hold true in my neck of the woods.  We recently completed a new car purchase, I was sure we were going to go used at first.  We were looking at 2 3 and 4 year old cars (Toyotas/Hondas) and the used prices really didn't seem to justify the fact that the cars were 2 or 3 or 4 years old and USED.  Throw in the fact that you (somewhat) get to pick what options you don't want and want, the warranty, and it seemed like an easy choice to go new.  We won't have an issue keeping the car 10+ years as long as we don't have to keep dumping repair money into it in its later years.   


Someone else on this forum pointed out that "great deals" on 1 and 2 year old car were mostly on luxury cars.  Since that spendypants crowd always wants the latest and greatest. 

ChpBstrd

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Re: Stop Overpaying for Lightly Used Cars
« Reply #19 on: October 18, 2018, 08:21:04 PM »
The entire premise of the article is wrong. Should be: Stop Overpaying by Shopping at Dealerships!

When shopping for our Honda Fit a couple years ago, I pointed out to the salesman that the 2y/o model he was showing us with, IDK, 50,000 miles was priced the same as the new ones. He said excitedly "I know! They don't depreciate much!"

Look at KBB.com and notice they have a dealer value and a private party value and these values are about $2,000-$3,000 apart for a newer vehicle. If you shop at a dealership for a used car, you are paying for balloons, golf cart batteries, and the well-lit, repaved-every-5-years lot. Now that we have this thing called the internet, you don't have to pay those thousands of dollars any more. Pay the private party value and avoid the surcharge.

obstinate

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Re: Stop Overpaying for Lightly Used Cars
« Reply #20 on: October 19, 2018, 11:30:43 AM »
A shout-out to JD Roth for this link today. Of course the author doesn't mention the higher cost of insurance, but it's excellent food for thought:

https://jalopnik.com/stop-overpaying-for-lightly-used-cars-1828576980
Another ridiculous conflation of asking prices for used cars with sale prices for new cars. :(

shawndoggy

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Re: Stop Overpaying for Lightly Used Cars
« Reply #21 on: October 19, 2018, 11:43:54 AM »
Look at KBB.com and notice they have a dealer value and a private party value and these values are about $2,000-$3,000 apart for a newer vehicle. If you shop at a dealership for a used car, you are paying for balloons, golf cart batteries, and the well-lit, repaved-every-5-years lot. Now that we have this thing called the internet, you don't have to pay those thousands of dollars any more. Pay the private party value and avoid the surcharge.

You may also be paying for a nice detail, a visit from the local door ding guy, a fresh oil change, matching tires, potentially brakes, etc.  The prep work put in by a dealer vs "some dude on CL" can sometimes be pretty great.  LOL, how many CL car ads have you seen where the seller's car is dirty and has a fast food cup in the cupholder. 

That's not to say every dealer puts legit money into reconditioning, but many do, especially on late model used / certified cars.

The most economical path is to get good at tinkering with cars and buy fully depreciated vehicles, but you have to love tinkering with cars.  Buddy of mine is a Land Cruiser nut, they're not gas efficient at all but he buys them at 200,000 miles, keeps them maintained himself, and then sells at a profit when he finds the next one.

Haha I've been down this road many times.  I'm not saying it's not possible, but buying for $10K, dumping $5K into repairs/maintenance/upgrades, and then selling for $12.5k isn't selling at a profit.  I've "made money" on several vehicles like that.

Still in the long run, buying and owning a 6-10 year old car for a few years scratches the "new (to me) car" itch.  I don't have the discipline or confidence in my decisions to buy a car and stick with it for 15 years.  I get a wandering eye after a few years.

Dicey

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Re: Stop Overpaying for Lightly Used Cars
« Reply #22 on: October 19, 2018, 12:24:38 PM »
A shout-out to JD Roth for this link today. Of course the author doesn't mention the higher cost of insurance, but it's excellent food for thought:

https://jalopnik.com/stop-overpaying-for-lightly-used-cars-1828576980
Another ridiculous conflation of asking prices for used cars with sale prices for new cars. :(
I would never buy a used car from a dealer, but many people, even purported mustachians, do. Just be sure you do the math every single time, because even you might be surprised.

A friend of mine made a helluva deal in 2008 when nobody was buying new cars. She paid cash. She is still driving it and expects to do so for at least ten more years.

obstinate

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Re: Stop Overpaying for Lightly Used Cars
« Reply #23 on: October 19, 2018, 12:26:10 PM »
I would never buy a used car from a dealer, but many people, even purported mustachians, do. Just be sure you do the math every single time, because even you might be surprised.
Especially when buying from a dealer, one should not pay the asking price. But you're right that you should do the math.

Dicey

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Re: Stop Overpaying for Lightly Used Cars
« Reply #24 on: October 19, 2018, 12:39:01 PM »
I would never buy a used car from a dealer, but many people, even purported mustachians, do. Just be sure you do the math every single time, because even you might be surprised.
Especially when buying from a dealer, one should not pay the asking price. But you're right that you should do the math.
Ah, but there's still the issue is anchoring to be avoided as well. So what if the dealer comes down in price $2,000 or 10% (or whatever - those are made-up numbers)? You're shopping at a full retail operation. They deliberately build in lots of fat, just to tease you with their discounts. Don't fall for it, at a car dealership or anywhere.

shawndoggy

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Re: Stop Overpaying for Lightly Used Cars
« Reply #25 on: October 19, 2018, 01:07:16 PM »
I would never buy a used car from a dealer, but many people, even purported mustachians, do. Just be sure you do the math every single time, because even you might be surprised.
Especially when buying from a dealer, one should not pay the asking price. But you're right that you should do the math.
Ah, but there's still the issue is anchoring to be avoided as well. So what if the dealer comes down in price $2,000 or 10% (or whatever - those are made-up numbers)? You're shopping at a full retail operation. They deliberately build in lots of fat, just to tease you with their discounts. Don't fall for it, at a car dealership or anywhere.

Frankly this isn't nearly as true as it used to be.  everyone can go on cars.com or cargurus and see the cheapest price for 123 year XYZ model within 500 miles in seconds.  This means that there's a lot of price compression around the "good" and "great" deal prices... and those dealers (like the dealers who are doing the same thing with new cars and trucks) don't have very much room to negotiate.  You are never going to get $2k or 10% off of a cargurus "great deal" car.  you just aren't.

Now there are certainly reasons to go private party... vehicle history, finding someone who just wants to be done with the deal, and for some of us avoiding sales tax.  But there's a lot of inconvenience that can accompany buying from a private party too... paying off a seller's lender, going to DMV (my state allows the dealer to actually register the car in the buyer's name), conducting your own inspection of the vehicle, etc.  And while presumably not a mustachian concern, there's also the convenience of the on-site financing guy (to get you into 84 low low monthly payments).

Me, I'm always chasing that "no sales tax on private party sales" thing (automatic 8% discount!), but I also totally get the convenience of buying at a dealer.

obstinate

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Re: Stop Overpaying for Lightly Used Cars
« Reply #26 on: October 19, 2018, 01:53:55 PM »
Me, I'm always chasing that "no sales tax on private party sales" thing (automatic 8% discount!), but I also totally get the convenience of buying at a dealer.
In case anyone else is tempted to do the same, this is most often tax fraud. You can get away with it, but it's unethical and can land you in trouble: https://money.stackexchange.com/questions/43590/sales-tax-trick-while-buying-a-used-car-i-e-declaring-sale-at-lower-than-act

shawndoggy

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Re: Stop Overpaying for Lightly Used Cars
« Reply #27 on: October 19, 2018, 02:46:54 PM »
In case anyone else is tempted to do the same, this is most often tax fraud. You can get away with it, but it's unethical and can land you in trouble: https://money.stackexchange.com/questions/43590/sales-tax-trick-while-buying-a-used-car-i-e-declaring-sale-at-lower-than-act

Whut?  Dude in my state THERE IS NO SALES TAX ON PRIVATE PARTY SALES. Whether you are tempted or you are not tempted, you just won’t pay sales tax when you buy from a private party even if you want to. It’s not a “trick” or a “gimmick”. It’s the law.


Sent from my iPhone using Tapatalk

obstinate

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Re: Stop Overpaying for Lightly Used Cars
« Reply #28 on: October 19, 2018, 02:57:22 PM »
In case anyone else is tempted to do the same, this is most often tax fraud. You can get away with it, but it's unethical and can land you in trouble: https://money.stackexchange.com/questions/43590/sales-tax-trick-while-buying-a-used-car-i-e-declaring-sale-at-lower-than-act

Whut?  Dude in my state THERE IS NO SALES TAX ON PRIVATE PARTY SALES. Whether you are tempted or you are not tempted, you just won’t pay sales tax when you buy from a private party even if you want to. It’s not a “trick” or a “gimmick”. It’s the law.

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I see. Sorry. I wasn't aware that there were any states like this. Normally when people say that they are going to avoid taxes using private party sales, they are referring to the process of understating the sale price of the car. For those who aren't aware, Arizona, Georgia, Hawaii, and Nevada do not tax private party sales. I stand corrected.

Aside: no state should tax secondary sale of a vehicle, because it's fucking stupid, but that's neither here nor there.

Dicey

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Re: Stop Overpaying for Lightly Used Cars
« Reply #29 on: October 19, 2018, 04:09:33 PM »
I would never buy a used car from a dealer, but many people, even purported mustachians, do. Just be sure you do the math every single time, because even you might be surprised.
Especially when buying from a dealer, one should not pay the asking price. But you're right that you should do the math.
Ah, but there's still the issue is anchoring to be avoided as well. So what if the dealer comes down in price $2,000 or 10% (or whatever - those are made-up numbers)? You're shopping at a full retail operation. They deliberately build in lots of fat, just to tease you with their discounts. Don't fall for it, at a car dealership or anywhere.

Frankly this isn't nearly as true as it used to be.  everyone can go on cars.com or cargurus and see the cheapest price for 123 year XYZ model within 500 miles in seconds.  This means that there's a lot of price compression around the "good" and "great" deal prices... and those dealers (like the dealers who are doing the same thing with new cars and trucks) don't have very much room to negotiate.  You are never going to get $2k or 10% off of a cargurus "great deal" car.  you just aren't.

Now there are certainly reasons to go private party... vehicle history, finding someone who just wants to be done with the deal, and for some of us avoiding sales tax.  But there's a lot of inconvenience that can accompany buying from a private party too... paying off a seller's lender, going to DMV (my state allows the dealer to actually register the car in the buyer's name), conducting your own inspection of the vehicle, etc.  And while presumably not a mustachian concern, there's also the convenience of the on-site financing guy (to get you into 84 low low monthly payments).

Me, I'm always chasing that "no sales tax on private party sales" thing (automatic 8% discount!), but I also totally get the convenience of buying at a dealer.
1. Reaffirming those were "made up numbers".
2. Paying for convenience is not the mustachian way.
3. There is no such discount in my state. Sales tax is collected when you register the car at the DMV.

ETA: I see others have covered point #3. Thank you for clarifying.

ender

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Re: Stop Overpaying for Lightly Used Cars
« Reply #30 on: October 20, 2018, 01:34:52 PM »
Frankly this isn't nearly as true as it used to be.  everyone can go on cars.com or cargurus and see the cheapest price for 123 year XYZ model within 500 miles in seconds.  This means that there's a lot of price compression around the "good" and "great" deal prices... and those dealers (like the dealers who are doing the same thing with new cars and trucks) don't have very much room to negotiate.  You are never going to get $2k or 10% off of a cargurus "great deal" car.  you just aren't.


It's also interesting to see this reflected in dealerships listed price online vs lot price.

Oftentimes the online price is much better than the sticker price on the lot and it's because of exactly this. People who show up at a dealership and don't research online? The dealer can just offer the online price and the customer feels they get a GREAT DEAL!

Dealerships used to benefit from information disparity. Now, much of that is gone (for online shoppers, at least) because it takes minutes rather than hours/days to see inventory at every dealership within a 100 mile radius.

SnackDog

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Re: Stop Overpaying for Lightly Used Cars
« Reply #31 on: October 20, 2018, 04:31:25 PM »
Having shopped for vehicles recently I can confirm that the old days of overpricing and dickering are gone.  I had to walk out of one dealership because not only would they not negotiate on price, they would not give me the car for the advertised price!  Dealers use low online prices to lure shoppers in then try to get them to pay more. Classic bait and switch, only they are not "advertising" the price, just posting it.  And they will tell you flat out that they can't do better than the price advertised on the internet.

I ended up buying two used cars from dealers..  One I was about to negotiate down about 10% and the other was full price.  Both were squeaky clean and screaming deals for exactly what we wanted.  Also bought a house around the same time and squeezed the seller significantly under the price of comparables, causing the selling agent to have a near aneurysm: "my client will sell at this price but this is really outrageous, I have never seen anything like it, I demand  an explanation, etc, etc".

Mississippi Mudstache

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Re: Stop Overpaying for Lightly Used Cars
« Reply #32 on: October 22, 2018, 11:47:23 AM »
Having shopped for vehicles recently I can confirm that the old days of overpricing and dickering are gone.

Exactly. If you think that the "sticker price" is the price, you're an idiot and will be taken advantage of (but you'll think you got a deal!). If you know the online price, then know that you will absolutely be paying more than that for the car after they get done tacking on all the fees & bullshit. Small, independent dealers are often much better in this regard.

ysette9

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Re: Stop Overpaying for Lightly Used Cars
« Reply #33 on: October 22, 2018, 12:38:17 PM »
I listened to a podcast a while back on used car sales. I believe it was a This American Life episode where they followed several salespeople for a couple of weeks and talked about how they make money. It sounded like a really tough business to be in with slim and sometimes negative margins. The message they came away with is that they mostly aren’t screwing us all with fat margins like it used to be. Information is just too widely available nowadays.

CoffeeR

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Re: Stop Overpaying for Lightly Used Cars
« Reply #34 on: October 22, 2018, 07:01:33 PM »
Having shopped for vehicles recently I can confirm that the old days of overpricing and dickering are gone.
Maybe there is a regional element to this. I have purchased 5 cars in the last 3+ years and the issue is not so much that the you cannot find the price of a used car, it is that the price people are willing to pay for a lightly used car is IMO too high and makes financially no sense.
« Last Edit: October 23, 2018, 06:49:26 AM by CoffeeR »

englishteacheralex

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Re: Stop Overpaying for Lightly Used Cars
« Reply #35 on: October 22, 2018, 10:16:03 PM »
In case anyone else is tempted to do the same, this is most often tax fraud. You can get away with it, but it's unethical and can land you in trouble: https://money.stackexchange.com/questions/43590/sales-tax-trick-while-buying-a-used-car-i-e-declaring-sale-at-lower-than-act

Whut?  Dude in my state THERE IS NO SALES TAX ON PRIVATE PARTY SALES. Whether you are tempted or you are not tempted, you just won’t pay sales tax when you buy from a private party even if you want to. It’s not a “trick” or a “gimmick”. It’s the law.

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I see. Sorry. I wasn't aware that there were any states like this. Normally when people say that they are going to avoid taxes using private party sales, they are referring to the process of understating the sale price of the car. For those who aren't aware, Arizona, Georgia, Hawaii, and Nevada do not tax private party sales. I stand corrected.

Aside: no state should tax secondary sale of a vehicle, because it's fucking stupid, but that's neither here nor there.

Wait, what? I've never bought a car anywhere other than Hawaii (it's where I've lived since I graduated from college) and I've never bought a car except through a private party. I always figured people who bought used cars at a dealer were being suckers because of the sales tax. But...is that really true? That you have to pay sales tax on private party car sales in most other states? Wow. Mind blown. Finally something cheaper about living in Hawaii.

Mississippi Mudstache

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Re: Stop Overpaying for Lightly Used Cars
« Reply #36 on: October 23, 2018, 06:24:31 AM »
In case anyone else is tempted to do the same, this is most often tax fraud. You can get away with it, but it's unethical and can land you in trouble: https://money.stackexchange.com/questions/43590/sales-tax-trick-while-buying-a-used-car-i-e-declaring-sale-at-lower-than-act

Whut?  Dude in my state THERE IS NO SALES TAX ON PRIVATE PARTY SALES. Whether you are tempted or you are not tempted, you just won’t pay sales tax when you buy from a private party even if you want to. It’s not a “trick” or a “gimmick”. It’s the law.

Sent from my iPhone using Tapatalk
I see. Sorry. I wasn't aware that there were any states like this. Normally when people say that they are going to avoid taxes using private party sales, they are referring to the process of understating the sale price of the car. For those who aren't aware, Arizona, Georgia, Hawaii, and Nevada do not tax private party sales. I stand corrected.

Aside: no state should tax secondary sale of a vehicle, because it's fucking stupid, but that's neither here nor there.

Wait, what? I've never bought a car anywhere other than Hawaii (it's where I've lived since I graduated from college) and I've never bought a car except through a private party. I always figured people who bought used cars at a dealer were being suckers because of the sales tax. But...is that really true? That you have to pay sales tax on private party car sales in most other states? Wow. Mind blown. Finally something cheaper about living in Hawaii.

That's true, but it's based on the honor system (at least in the states I've purchased private party). You can fill out the title receipt for whatever value you choose. The biggest risk is that if you get swindled, you really only have recourse for the amount that you recorded paying. Also, Zeus might strike you with a lightning bolt for committing tax fraud.

jeninco

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Re: Stop Overpaying for Lightly Used Cars
« Reply #37 on: October 23, 2018, 08:26:50 AM »
I agree with the commenter above (way above) who said "don't overpay for lightly used IN DEMAND cars."  We tend to buy quasi-luxury cars that lose their luster (for people who want them for social signaling) after a few years, but they'll run for another decade or two after that. And get pretty good mileage, and handle well in snow/ice. And be seriously fun to drive for the times when we need to drive. (I figure that over 50% of my driving is "forced driving", i.e. having to get someone someplace >1 hour away, and it might as well be fun. Also, I don't drive at all at least 5 days/week.)

ChpBstrd

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Re: Stop Overpaying for Lightly Used Cars
« Reply #38 on: October 24, 2018, 09:03:09 AM »
In case anyone else is tempted to do the same, this is most often tax fraud. You can get away with it, but it's unethical and can land you in trouble: https://money.stackexchange.com/questions/43590/sales-tax-trick-while-buying-a-used-car-i-e-declaring-sale-at-lower-than-act

Whut?  Dude in my state THERE IS NO SALES TAX ON PRIVATE PARTY SALES. Whether you are tempted or you are not tempted, you just won’t pay sales tax when you buy from a private party even if you want to. It’s not a “trick” or a “gimmick”. It’s the law.

Sent from my iPhone using Tapatalk
I see. Sorry. I wasn't aware that there were any states like this. Normally when people say that they are going to avoid taxes using private party sales, they are referring to the process of understating the sale price of the car. For those who aren't aware, Arizona, Georgia, Hawaii, and Nevada do not tax private party sales. I stand corrected.

Aside: no state should tax secondary sale of a vehicle, because it's fucking stupid, but that's neither here nor there.

Wait, what? I've never bought a car anywhere other than Hawaii (it's where I've lived since I graduated from college) and I've never bought a car except through a private party. I always figured people who bought used cars at a dealer were being suckers because of the sales tax. But...is that really true? That you have to pay sales tax on private party car sales in most other states? Wow. Mind blown. Finally something cheaper about living in Hawaii.

That's true, but it's based on the honor system (at least in the states I've purchased private party). You can fill out the title receipt for whatever value you choose. The biggest risk is that if you get swindled, you really only have recourse for the amount that you recorded paying. Also, Zeus might strike you with a lightning bolt for committing tax fraud.

In my state, $4000 is the cutoff. For sales below that amount, you pay no tax. For sales above that amount, you pay a 6.5% tax on the entire sale price. Naturally, it is hard to find cars for sale in the $4000 range.

radram

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Re: Stop Overpaying for Lightly Used Cars
« Reply #39 on: October 24, 2018, 10:35:23 AM »
We saw the same thing a few years ago looking into buying a Ford Escape.

We paid $16500ish for a brand new Escape with MSRP around $25k. Similar cars that were 2-3 years used were all around 14-14.5k depending on mileage. While we probably paid a slight premium for 2-3 more years of car ownership the gap was much, much, MUCH less than many of the "buy used 4life!" advocates.

I'm a little surprised @radram that you ignore maintenance costs in your calculation.

The biggest difference regarding maintainence costs for me is the DIFFERENCE in maintenance costs. I will perform all oil changes, regardless of car and year, etc. When I am deciding on one car vs. another, oil changes do not really factor in, since I will be performing those anyway. Same with tires, brakes, and other regularly wearable parts that will need attention regardless of the vehicle you use.

Once you get into parts you may/may not replace, that is when the difference is important to me. Of course larger parts count (transmission, engine, etc.) but so do parts I might not ever replace on some cars ( radiators, master cylinders, mufflers and such). I still do the work when I can.

If I ever get to the point when we have to decide between car vs. no car, all of those costs will need to be factored in.

Lady Stash

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Re: Stop Overpaying for Lightly Used Cars
« Reply #40 on: October 24, 2018, 11:12:50 AM »
As far as lightly used cars being overpriced, I recently found this to be very true!  It's interesting to see an article on it.

After living in a city and being happily car-less for a couple years I decided to move and needed to buy a car.

I was looking for a Honda CRV.  I scoured craigslist and used cars at dealers, expecting to buy a CRV a couple years old.  But when I did the math, buying a used one just didn't add up.  They were too expensive compared to the new versions.   The best I could find was something a couple years old with 30K miles for about 3K less than new.  Just not worth it

So I bought a brand new Honda CRV with AWD and a moon roof for 27K cash.  I took an amazing road trip through National Parks in the US.  I wanted AWD and a reliable car since I was driving alone through the mountains and in some areas without cell coverage.  Since I'm short, my dog and I could comfortably sleep in the back of the car when it was raining.  All my stuff, including a cooler and camp stove fit easily and when friends joined me, their stuff fit too.  (Side note, but camping is surprisingly cheap once you get away from the coasts - some beautiful campsites were only $6).

When I landed in my new city a couple months later, I pulled up KBB to see how much of a depreciation hit I'd taken.  I'd put 9K miles on the car.  According to KBB I could do a private party sale of my car, with 9K miles on it for.... 27K.  Exactly what I had paid for it new.  I saw used versions of my car at CarMax for 28K, more than I had paid for it new.   If the price is still that high next year, I may almost consider selling it and moving to a new version.  I'm expecting about 3K depreciation per year based on a 10 year life span.  If I get more years out of it, great. 

If prices stay inverted and I can sell it for only 2K less than I bought it after 2 years, it might makes sense to buy a new one even with the insurance and taxes added in.

« Last Edit: October 24, 2018, 11:59:37 AM by Lady Stash »

obstinate

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Re: Stop Overpaying for Lightly Used Cars
« Reply #41 on: October 24, 2018, 01:36:19 PM »
If prices stay inverted and I can sell it for only 2K less than I bought it after 2 years, it might makes sense to buy a new one even with the insurance and taxes added in.
Unlikely. You were looking at asking prices. Rarely does anyone sell for their asking price.

obstinate

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Re: Stop Overpaying for Lightly Used Cars
« Reply #42 on: October 24, 2018, 01:50:26 PM »
I was looking for a Honda CRV.  I scoured craigslist and used cars at dealers, expecting to buy a CRV a couple years old.  But when I did the math, buying a used one just didn't add up.  They were too expensive compared to the new versions.   The best I could find was something a couple years old with 30K miles for about 3K less than new.  Just not worth it
Looking at CL in my area, I see three with under 50k miles, under four years old, under $17k. I checked the SF Bay Area too to rule out the NY salty road tax, and I see plenty in the price range there too. Looks like they start at $24k, so that's a minimum of 33% off for a car with 40k miles on it. And they are still at about $8-9k with 120-150k miles on them. That means you pay $7k for the first 40k miles, and then $8k for the next 80k miles. Basically you pay a 100% premium for the privilege of driving the first 40k miles.

Y'all are trippin'. If you want a fancy car, just say you want a fancy car. Don't spread disinformation about the relative merits of buying used and new into the deal. Have you ever heard the notion that if something is too good to be true, it probably is? You should apply your noodles to that truism and the case of the magically appreciating lightly used car.
« Last Edit: October 24, 2018, 02:25:11 PM by obstinate »

shawndoggy

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Re: Stop Overpaying for Lightly Used Cars
« Reply #43 on: October 24, 2018, 02:05:12 PM »
Looking at CL in my area, I see three with under 50k miles, under four years old, under $17k. I checked the SF Bay Area too to rule out the NY salty road tax, and I see plenty in the price range there too. Looks like they start at $24k, so that's a minimum of 33% off for a car with 40k miles on it. And they are still at about $8-9k with 120-150k miles on them. That means you pay $7k for the first 40k miles, and then $8k for the next 80k miles. Basically you pay a 100% premium for the privilege of driving the first 40k miles.

Y'all are trippin'.

Wasn't there a new model introduced in 2017?  I would expect 12-16 models to trade at a discount just owing to being "outdated," everything else being equal. 

obstinate

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Re: Stop Overpaying for Lightly Used Cars
« Reply #44 on: October 24, 2018, 02:19:05 PM »
Wasn't there a new model introduced in 2017?  I would expect 12-16 models to trade at a discount just owing to being "outdated," everything else being equal.
Pick any mass market car, and I'll do the same experiment and get the same result. If the depreciation curve were actually shallower when the car is new, everyone would buy new cars. Only through the application of massive amounts of wishful thinking (mainly in the form of assuming asking prices==selling prices) can you come out with any other result.
« Last Edit: October 24, 2018, 02:22:46 PM by obstinate »

Lady Stash

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Re: Stop Overpaying for Lightly Used Cars
« Reply #45 on: October 24, 2018, 03:07:28 PM »
Quote
Unlikely. You were looking at asking prices. Rarely does anyone sell for their asking price.
I've found the Kelly Blue Book private party price to be a pretty accurate reflection of what you are going to pay/get.  Is that not your experience?

Quote
If the depreciation curve were actually shallower when the car is new, everyone would buy new cars.
I don't think enough people are doing the math.  All the advice out there is to buy a used car so I'm not sure enough people are actually checking.  Also, I got a pretty good cash discount, so for someone financing there would be a bigger difference.

Quote
Looks like they start at $24k, so that's a minimum of 33% off for a car with 40k miles on it. And they are still at about $8-9k with 120-150k miles on them. That means you pay $7k for the first 40k miles, and then $8k for the next 80k miles. Basically you pay a 100% premium for the privilege of driving the first 40k miles.
Where are you getting a 100% premium?
I only see a significant benefit if you are willing to pick one up at 90K miles or more.  Since I'm driving alone in places without cell coverage, I'm willing to pay more so I'm not driving a car with 150K miles on it.  It's worth it to me.  24K down to 17K is 7K for 40K miles, assuming you are comparing like models.  The metro area I was in didn't have any with 40K miles for under 20K. 

My last car was a used Ford Focus I bought for 8K from Craigslist and sold for 2K 6 years later.  About 1K per year in depreciation.  So yes, this is more expensive to operate and I am intentionally paying more for a nicer car.  What's surprising to me is that its not depreciating faster.   YMMV.

I will also admit that the apple car play integration with your cell phone on the new models is pretty sweet and was another data point for me.
« Last Edit: October 24, 2018, 03:35:31 PM by Lady Stash »

obstinate

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Re: Stop Overpaying for Lightly Used Cars
« Reply #46 on: October 24, 2018, 06:57:08 PM »
Where are you getting a 100% premium?
Based on my determination that CRVs with 40k miles come at a ~7k discount and 120k at a ~14k discount on a 24k base price, from examining CL.

I only see a significant benefit if you are willing to pick one up at 90K miles or more.
You aren't looking at the same Craigslist I am, then.

The metro area I was in didn't have any with 40K miles for under 20K. 
Mind if I ask which? Maybe some cities are worse for used, and that would be a good thing to know.

I will also admit that the apple car play integration with your cell phone on the new models is pretty sweet and was another data point for me.
In most cars, you can easily replace the head unit after market for $100-200.

Dicey

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Re: Stop Overpaying for Lightly Used Cars
« Reply #47 on: October 24, 2018, 11:24:53 PM »
Where are you getting a 100% premium?
Based on my determination that CRVs with 40k miles come at a ~7k discount and 120k at a ~14k discount on a 24k base price, from examining CL.

I only see a significant benefit if you are willing to pick one up at 90K miles or more.
You aren't looking at the same Craigslist I am, then.

The metro area I was in didn't have any with 40K miles for under 20K. 
Mind if I ask which? Maybe some cities are worse for used, and that would be a good thing to know.

I will also admit that the apple car play integration with your cell phone on the new models is pretty sweet and was another data point for me.
In most cars, you can easily replace the head unit after market for $100-200.
Wow, obstinate, your comments come off as pretty rude. Are you  familiar with Forum Rule #1?

You are assuming that all used vehicles are equal, which is just plain wrong. Lady Stash did the research and the math, then made a reasonable choice for her personal situation.

radram

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Re: Stop Overpaying for Lightly Used Cars
« Reply #48 on: October 25, 2018, 07:01:20 AM »
Quote
Unlikely. You were looking at asking prices. Rarely does anyone sell for their asking price.
I've found the Kelly Blue Book private party price to be a pretty accurate reflection of what you are going to pay/get.  Is that not your experience?

Quote
If the depreciation curve were actually shallower when the car is new, everyone would buy new cars.
I don't think enough people are doing the math.  All the advice out there is to buy a used car so I'm not sure enough people are actually checking.  Also, I got a pretty good cash discount, so for someone financing there would be a bigger difference.

Quote
Looks like they start at $24k, so that's a minimum of 33% off for a car with 40k miles on it. And they are still at about $8-9k with 120-150k miles on them. That means you pay $7k for the first 40k miles, and then $8k for the next 80k miles. Basically you pay a 100% premium for the privilege of driving the first 40k miles.
Where are you getting a 100% premium?
I only see a significant benefit if you are willing to pick one up at 90K miles or more.  Since I'm driving alone in places without cell coverage, I'm willing to pay more so I'm not driving a car with 150K miles on it.  It's worth it to me.  24K down to 17K is 7K for 40K miles, assuming you are comparing like models.  The metro area I was in didn't have any with 40K miles for under 20K. 

My last car was a used Ford Focus I bought for 8K from Craigslist and sold for 2K 6 years later.  About 1K per year in depreciation.  So yes, this is more expensive to operate and I am intentionally paying more for a nicer car.  What's surprising to me is that its not depreciating faster.   YMMV.

I will also admit that the apple car play integration with your cell phone on the new models is pretty sweet and was another data point for me.

You expect $3,000 depreciation per year, and you expect to drive this CRV for 10 years(I think you even said more years is great). Won't that mean that at some point, maybe around year 8 or so, your CRV will be one of the ones you will not even consider driving today?

I have never priced CRV's until today. I see LOTS with very high miles. That is a great sign to me regarding reliability. I saw a 2009 with 87,000 listed for $6,700 on craigslist, private party sale. I only looked for about 1 minute. Using your $3,000 per year calculation, this used car would be cost effective after just over 2 years of driving.

Your $3,000 annual cost gives you many options for selecting what to drive. Enjoy camping and saving $100 per night vs. hotel stays :)

obstinate

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Re: Stop Overpaying for Lightly Used Cars
« Reply #49 on: October 25, 2018, 07:45:17 AM »
Wow, obstinate, your comments come off as pretty rude. Are you  familiar with Forum Rule #1?
I am definitely rude sometimes, but, rereading the post you quoted, I don't see how this particular post is one of those times. It is a little terse, but that's not the same thing as rude. Maybe the "you aren't looking at the same Craigslist I am" bit? I probably could have worded that better, but I just mean, "When I look at Craigslist, I do not see the same pattern that you say you saw." Sorry about that! And I additionally apologize for any other instance of over-zealousness in this thread. I'll try to be better going forward.

In any case, the good 'ole Mustachian face punch is a little rude sometimes. Rule one is to not be a jerk, and I definitely don't agree that it's jerk-y behavior to point out when people are or might be wasting their money! Nowhere in this thread have I called anyone stupid or a bad person, and I'm definitely not going to start doing that. But I will say that I have seen circumstantial evidence of un-Mustachian decision-making.

You are assuming that all used vehicles are equal, which is just plain wrong.
I don't think I ever assumed that, but I could be wrong! :)

Lady Stash did the research and the math, then made a reasonable choice for her personal situation.
It may be true that Lady Stache's choice got her a CRV at the most efficient price within her stated parameters. But, if it is, I haven't seen evidence of that fact yet, besides that she said she did. All the other evidence I'm seeing is that buying new is much more expensive than buying lightly used, including in the case of her specific vehicle, in two different metros. I have asked, I think reasonably, for actual evidence that this was a Mustachian decision in this case. This is because I think that people are justifying to themselves, and this forum, decisions that don't comport with the philosophy of the site, under the guise of comporting with the philosophy of this site.

Now, it's no one's personal or corporate duty to satisfy me on this front, and if Lady Stash does not wish to do so, that will in no way be a strike against her in my book. But if we're actually trying to get to the truth of whether buying new is often better than buying lightly used, then I think the buying new partisans need to show some reasonable factual evidence that this is the case.
« Last Edit: October 25, 2018, 07:49:49 AM by obstinate »